Once the tax season is over, the last thing you probably want to think about is next year’s taxes. However, by taking time out now to plan for next year’s taxes, you can save yourself some stress later. Here are some tips to help you prepare now for next year’s tax filing season.
Review Your W-4 Withholding
Each year after you file taxes, you need to review your W-4 that is filed with your employer. The number of allowances you cite on the form are used to determine how much in taxes is taken out of your paycheck. The more allowances you have, the less your employer takes out.
To update your form, simply file a new one with your employer. If you are having too much money taken out of your taxes, raise the number of allowances on the form. This will give you more money to spend from your paycheck throughout the year. If you are interested in having a bigger tax return, reduce the number of allowances.
Enroll in Health Insurance
When you do not have health coverage, you could face a tax penalty next year on your taxes. To avoid that penalty, sign up for a health insurance plan. You can sign up for a plan through the government-sponsored Health Insurance Marketplace.
When you sign up through the Marketplace, you can find out whether or not you qualify for assistance with paying your premium. You can opt to receive assistance upfront or get a credit at tax time. You have a few months each year to enroll in a plan through the Marketplace’s open enrollment program. However, if you have a special event, such as the birth of a child, you can enroll at that time.
Contribute to Your Retirement Fund
You can reduce the amount of taxes that you owe next year by contributing to your retirement fund. When you contribute money to your 401(K), you can receive a matching amount reduction from your taxable income.
There are limitations to the amount you can contribute and receive a reduction for. The amount changes yearly, so check with your tax preparer to ensure that you do not exceed the amount.
There are many more things you can do to prepare for next year’s tax time. Talk to your tax preparer for other tips that are specific to your tax situation that can help ease your stress and the time you spend preparing for your taxes. For more information, visit websites like balkam.com.